How to deduce the Coefficient of variation using Excel

How to deduce Coefficient of variation using Excel

Excel has been prominent enough to support a variety of mathematical formulations while editing the sheet data. This has made Excel a versatile software in business, financing, trading, documentation, and other technical, non-technical domains. We could now easily estimate/calculate the coefficient of variation using Excel by simply implementing/executing a formula.

What does Coefficient of Variation Means and when is it used?

Basically, CV is an estimation of the ratio of standard deviation. Mean defines the average calculated value of measure. While standard deviation defines the amount of variance from the actual estimated value. Usually, we compare the units between two similar quantities or measuring units. Comparing 2 materials of the same measuring units is easier compared to different measuring units. For example, comparing the weight of 1 kg of sugar to the amount of rain that happened this month sounds drastic.

In such scenarios, the coefficient of variation helps. It estimates how the value is deviated from its mean value. Getting CVs of both cases like 12 percent and 15 percent (for instance) helps us to estimate the assumptions and deviation ratios.

Especially while auditing and material transactions during trade and deals this coefficient of variation term is considered.

Most of the time a minimum deviation proves feasible.

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Mathematical Formulation of Coefficient of Variation

We can refer to the below-mentioned formula to calculate a coefficient of variation:

Coefficient of Variation = (Standard Deviation / Mean) * 100.

In Mathematical terms: CV = (SD/x̄) * 100

Where CV= Coefficient of variations

SD=Standard Deviation

x̄= Mean

The output of the above equation will give a decimal value in case we don’t multiply the output by 100.

Calculating Coefficient of Variation using Excel

As we know, we need two parameters for deducing CVs.

1. Standard Deviation

2. Mean

Assuming we are working with 5 rows with data to calculate CV.

Then, the Standard Deviation formula will be = stdev(A1:A5)

And Mean formula will be= average(A1:A5)

Therefore, for calculating the Coefficient of Variation using Excel the formula will be

CV = stdev(A1:A5)/average(A1:A5))

If user wants the output in percentage he can simply multiply the output with 100

CV= stdev(A1:A5)/average(A1:A5)) X 100.

Step 1: Select the No of columns you want to calculate CV for

Step 2: In Formula text box, enter the mentioned formula

Note: Make sure you put the correct names of Rows in a formula

Step 3: Execute

Step 4: Multiply the answer with 100 to get the percentage of the same.

Appropriate CV values:

Most of the time the value of a CV is crucial. Please find below estimations for a proper CV value in your data gains.

1. CV values with less than 10 (CV<10.00) are considered more feasible.

2. CV values more than 10 but less than 30 (10<CV<30) are considered acceptable.

3. However, CV values more than 30 (CV> 30) are not feasible nor acceptable in any scenarios. The deviation from the mean shouldn’t be so varied from actual values.

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