# coefficient of variance's significance

As far as I know, the coefficient of variance (CV) is used for measuring consistency of any variable. But should one always depend on CV for taking decisions, especially when means the are different?

For instance, there are 2 companies: A and B. Company A has a mean profit of \$1000 and CV is 0.816%. Company B has a mean profit of \$7666.67, but CV is 26.8%.

Which company should one invest in?

As to your specific question, this is far too little information to decide which company to invest in. And, since profit can be negative, the CV may be nonsensical. Suppose, for example, that company C has profit over the last three years of \$1,000, \$0 and -$1,000 (a loss of \$1,000). Then the CV is undefined because the mean is 0. But change the first profit to \$1,001 and the CV is now 3001.5 (or 300,150%). Or make the the loss in year 3 one dollar more and the CV is negative. In addition to the very informative answer that Peter provided above, you should also take into serious consideration all of the descriptive statistics derived from your sample. Especially when it comes to optimum investment option selecting, skewness of your data plays crucial role in deciding which one would be the most promising in terms of profitability. For instance, suppose that you have this sample: $$1000,$$1500,$$1300,$$1400,$$1350,$$1550,$$1250,$$1100,$$10000,$$1150,$$1280. This sample implies CV=38,15% and mean profit=$$2080 Then we have another sample: $$2000,$$2160,$$1960,$$2200,-$$4000,$$8160,-$$10000,$$14160,-$$15000,$$19160,$2080 wich implies CV=141% and mean profit=2080