Non-Operating Income Hidden in Operating Earnings, a NOPAT Adjustment

Non-operating income is the complement of non-operating expenses, and are special items and one-time earnings that are not reported on the face of the income statement, and are instead hidden in other line items. The most common types of hidden non-operating expenses are gains on the sale of assets, some pension income, and income from legal settlements. 

An example of non-operating income is the unusually large gain on property sale, $600 million, that Alexander’s Inc., a real estate investment trust (REIT), received in 2012, which was 89% of its $674 million GAAP income, as reported in the REIT’s 2012 10-K:

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A labour of love from a quantitative investment analyst and economist, offering rigorous global equity research and essays on the economics of risk. This publication is reserved for matters of genuine import, published on an irregular schedule only when research warrants. Its readership comprises analysts, portfolio managers, and capital allocators from leading institutional investment firms across the world.

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