An analyst gathered the following information about the net profit margins of companies in two industries: Compared with the other industry, the relative dispersion of net profit margins is smaller for Industry ________.
A) B, because it has a smaller mean deviation.
B) B, because it has a smaller range of variation.
C) A, because it has a smaller standard deviation.
D) A, because it has a smaller coefficient of variation.

Question

An analyst gathered the following information about the net profit margins of companies in two industries:  Compared with the other industry, the relative dispersion of net profit margins is smaller for Industry ________.
A) B, because it has a smaller mean deviation. 
B) B, because it has a smaller range of variation. 
C) A, because it has a smaller standard deviation. 
D) A, because it has a smaller coefficient of variation.

Quizplus · Accepted Answer

The coefficient of variation (CV) is a measure of relative dispersion, which standardizes the standard deviation by the mean. A smaller CV indicates less variability relative to the mean. Therefore, the industry with the smaller CV, which is Industry A, has a smaller relative dispersion of net profit margins compared with the other industry.

An Analyst Gathered the Following Information About the Net Profit