 Formulas > =XIRR()

# How To Use XIRR() Function in Google Sheets

Description

Calculates the internal rate of return of an investment based on a specified series of potentially irregularly spaced cash flows.

Common questions about the XIRR formula:
1. What is the XIRR formula and how does it work?
2. How do I calculate XIRR for multiple cash flows?
3. What are the assumptions associated with XIRR?

How can the XIRR Formula be used appropriately?
The XIRR formula can be used appropriately to calculate the internal rate of return for a series of irregular cash flows. This includes cash flows that are paid or received at irregular intervals or change in amount for each payment. XIRR assumes that the cash flows will be compounded and compounded at a constant rate in the future.

How can the XIRR formula be commonly mistyped?
The XIRR formula is commonly mistyped by leaving out the initial investment amount, entering an incorrect discount rate, using the wrong date format, entering negative cash flows as positive cash flows, entering irregular cash flows as regular intervals, etc. This formula can also be mistyped as XIR or XRR.

What are some common ways the XIRR formula is used inappropriately?
The XIRR formula is often used inappropriately when cash flows of different magnitude are entered without consideration of time intervals, or are entered with varying compounding periods. Additionally, the XIRR formula may be used inappropriately when cash flows do not represent a single investment but rather multiple investments that are not combined into one total cash flow.

What are some common pitfalls when using the XIRR formula?
1. Not specifying the cash flows accurately.
2. Not entering the cash flows in chronological order.
3. Assuming that the same compounding period is applied to all cash flows.
4. Not considering the effects of different inflation rates over time.

What are common mistakes when using the XIRR formula?
1. Entering a negative cash flow as a positive cash flow.
2. Measuring the return in terms of the dollar amount rather than time.
3. Treating the cash flow dates as discrete events rather than individual cash flows.
4. Not considering the effects of different inflation rates over time.

What are common misconceptions people might have with the XIRR Formula?
1. Thinking that XIRR is a better measure of return than other methods.
2. Thinking that XIRR is a perfect measure of return that is immune to economic changes.
3. Thinking that XIRR is the same as the rate of return.
4. Thinking that XIRR is an absolute measurement of the performance of an investment.

How To Actually Use XIRR() in Sheets

`XIRR(cashflow_amounts, cashflow_dates, [rate_guess])`

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