The NOPAT (Net Operating Profit After Tax) margin is a key driver of economic earnings. It measures the profitability of a company after accounting for operating costs and taxes, but before considering the cost of capital. A higher NOPAT margin indicates that a company is more efficient at converting sales into actual profit. This efficiency can lead to higher economic earnings, which are a more comprehensive measure of profitability as they also consider the cost of capital. Therefore, the NOPAT margin can significantly influence a company's economic earnings.
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