Internal Rate of Return (IRR)

Published: | Updated: December 22, 2017

Definition - What does Internal Rate of Return (IRR) mean?

The internal rate of return (IRR) is a calculation of the financial growth of an investment or a financial venture, presented as a percentage. The higher the percentage, the higher the financial growth of the investment.

It is also known as the dollar weighted rate of return.

Insuranceopedia explains Internal Rate of Return (IRR)

The IRR is used heavily in finance, from the interest rates on loans to the income made from a real estate deal. What it generally shows is the return of the initial investment and the money in excess of it. In other words, it expresses profitability. Because of this, investors analyze the IRR of a business before investing in it.


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