INVESTMENT ANALYSIS GUIDE
Why Cash-Flow Timing Changes IRR
IRR discounts each cash flow according to when it occurs, so timing changes return even if total profit is unchanged.
In this guideWhat the analysis measuresCalculation frameworkUnderwriting reviewHow to use the result
What the analysis measures
Record contributions when funded and distributions when received. Annual aggregation can hide meaningful intra-year timing for developments.
Calculation framework
Delays usually increase interest, extend negative equity exposure and postpone exit proceeds. All three effects should recalculate together.
Underwriting review
Use XIRR for irregular dates or periodic IRR for equally spaced periods. Do not mix monthly and annual rates without correct compounding.
How to use the result
Compare duration, equity multiple and NPV alongside IRR to distinguish faster cash return from greater absolute value creation.