IRR Full Form - What does IRR stand for?
IRR stands for
Internal Rate of Return
Internal Rate of Return (IRR) is the discount rate at which the net present value of an investment's cash flows equals zero, in other words the annualised break-even growth rate the project earns. If the IRR exceeds the cost of capital or the investor's required return, the project is generally considered worth undertaking, and if it falls below, the project destroys value. IRR is popular because it expresses a return as a percentage and can be compared with a hurdle rate or another investment on the same scale. Its weaknesses appear with non-conventional cash flows: if the sign of cash flows changes more than once, such as in mining or staged projects, multiple IRRs can exist and the rule becomes ambiguous. IRR also implicitly assumes that intermediate cash flows are reinvested at the IRR itself, which is often unrealistic for high rates. For personal investments with irregular contributions, XIRR is the practical variant because it uses actual dates. Sensible practice is to evaluate with NPV for absolute value and use IRR as the percentage yardstick alongside it.
What does IRR stand for?
IRR is an abbreviation of Internal Rate of Return. Each letter in IRR maps to a word in the phrase:
| Letter | Word |
|---|---|
| I | Internal |
| R | Rate |
| R | Return |
Where is IRR used?
Investment abbreviations show up in contract notes, portfolio statements and market reports. Knowing what each term stands for makes it easier to track returns and risk.
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Frequently Asked Questions
What does IRR stand for?+
IRR stands for Internal Rate of Return.
What is IRR?+
Internal Rate of Return (IRR) is the discount rate at which the net present value of an investment's cash flows equals zero, in other words the annualised break-even growth rate the project earns. If the IRR exceeds the cost of capital or the investor's required return, the project is generally considered worth undertaking, and if it falls below, the project destroys value. IRR is popular because it expresses a return as a percentage and can be compared with a hurdle rate or another investment on the same scale. Its weaknesses appear with non-conventional cash flows: if the sign of cash flows changes more than once, such as in mining or staged projects, multiple IRRs can exist and the rule becomes ambiguous. IRR also implicitly assumes that intermediate cash flows are reinvested at the IRR itself, which is often unrealistic for high rates. For personal investments with irregular contributions, XIRR is the practical variant because it uses actual dates. Sensible practice is to evaluate with NPV for absolute value and use IRR as the percentage yardstick alongside it.
What is IRR used for?+
IRR (Internal Rate of Return) belongs to the Investments & Markets category. Investment abbreviations show up in contract notes, portfolio statements and market reports. Knowing what each term stands for makes it easier to track returns and risk.
Which category does IRR belong to?+
IRR is filed under Investments & Markets, one of the 10 categories in our directory of 1538 full forms.