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The coefficient of variation represents the ratio of the standard deviation to the mean, and it is a useful statistic for comparing the degree of variation from one data series to another, even if the means are drastically different from each other.

Usefulness in Business: Professional business appraisers pay close attention to the so-called coefficient of variation. It is a ratio of the standard deviation to the average value of a given valuation multiple. The reason this is important is this: the smaller the coefficient of variation, the closer the actual business selling price multiples cluster around the average. If you use the valuation multiple with the low coefficient of variation, your business value estimate is likely to be more accurate since it falls into a narrow range. Another way to look at this is that the business people in your industry tend to price business sale deals using such valuation multiples.