Glossary

Internal Rate of Return (IRR)

The interest rate, which is applied to a stream of cash flows, that causes the sum of the outflows and inflows to equal zero.

See Also

Hurdle rate, private equity group, return on investment, venture capital.

Tips

IRR is commonly used by private equity firms when calculating returns. IRR differs from the rate of return because IRR is the annualized return on investment. The length of time for holding an asset has a tremendous impact on the IRR. For an asset purchased at $1,000, then sold six months later at $2,000, the rate of return would be 100%. However, the IRR would be closer to 200%.

Selling Your Business?

Work with an industry leader that gets you results.

We invested over a decade perfecting every step of the process. The result is a method proven to reduce your risk and maximize your price.

View Our Process Now