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LBO

IRR and MOIC

By SuperdayReps · Wharton MBA · ex-Greenhill · investment banking interview coaching

6 min read · updated July 2, 2026

Private equity gets scored on two numbers. MOIC and IRR. If you're interviewing for a LBO seat and you fumble the difference, the conversation is over. So let's make it stick.

MOIC answers: how many times did I multiply my money? IRR answers: how fast did I earn it? They measure the same deal from two angles, and neither one alone tells the whole story.

MOIC: the simplest number in finance

Multiple on invested capital (MOIC) is just cash out divided by cash in.

MOIC=Equity proceeds at exitEquity invested at entry\text{MOIC} = \frac{\text{Equity proceeds at exit}}{\text{Equity invested at entry}}

Put in $100 of equity, get back $300 when you sell the company. That's a 3.0x MOIC. Done. You'll also hear it called "cash-on-cash," same idea.

Notice what MOIC does not care about: time. A 3.0x is a 3.0x whether it took three years or thirteen. That's the number's strength (dead simple) and its blind spot.

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Frequently asked

What is the difference between IRR and MOIC?
MOIC is how many times you multiplied your money, cash out divided by cash in, and it ignores time. IRR is the annualized, compounded return, so it accounts for how long you held. Put in 100 and get back 300 and that is a 3.0x MOIC whether it took three years or thirteen; IRR tells you the speed.
How do you calculate MOIC?
MOIC is equity proceeds at exit divided by equity invested at entry. Put in 100 of equity and get back 300 when you sell, and that is a 3.0x MOIC. It is sometimes called cash-on-cash. MOIC is the simplest number in finance, but it says nothing about how long your money was tied up.
What IRR and MOIC do private equity firms target?
For a standard buyout the benchmark is roughly a 20 to 25% IRR and a 2.0x to 3.0x MOIC over a typical five-year hold. Those goals are consistent with each other; a 2.5x over five years lands right around a 20% IRR. A 3.0x over five years is about a 25% IRR.
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