Table1 below shows the average amount of money InoSmart Inc. spent on salaries in the year 2020.
Table 1: Average Salaries for InoSmart.
From the table above, InoSmart Inc. paid the lowest amount in March, totaling $67,950, and the highest amount in July, amounting to $816,550. The mean of the dataset was $648,908.33 with a standard deviation of $273,342.33, which meant that the average salaries were not concentrated around the mean but had outliers. Outliers are extreme data points that differ remarkably from the rest of the dataset (Standard Deviation, n.d.). In this case, they include March and June average salaries. These two outliers came from the president imposing a national-wide lockdown in March and June because of COVID-19. This meant that workers hired temporarily were not paid during the two months.
The sum of average salaries for last year was $7,786,900, and the range was $748,600. This means that InoSmart Inc. should forecast nine million dollars in salaries for the year 2021. This is because the data for 2020 had two outliners of $67,950 and $69,440. All the other months had a value larger than $700,000. The median of the data was $748,400, which means that we can add this amount twice to the sum of average salaries to get $9,283,700. In summary, the General Manager should instruct the finance department to save nine million dollars for 2021 salaries.
The first factor the financial advisor will consider while making decisions about the two stocks will be comparing the percentage increase for the stock price and going for the highest one. In this case, both stocks are equal in terms of performance since they bear a 15% price performance. This means if stock A or B had a trading price of $100 at the beginning of the year, then by the end of the year, it would be trading at $115.
The second step would be to compare the standard deviation, which is 8.3% for stock A, and 2.1% for stock B. The standard deviation indicates how risky a stock is in the stock market. It shows the stock’s price volatility, whereby a high standard deviation would signify that the price is widely dispersed from the average price. A low standard deviation percentage would suggest that the prices have been stable and have not changed much over the year.
As a stock advisor, an ROI (Return on Investment) of 15% per stock is a good investment decision though the distinguishing factor between the two stocks is the standard deviation. Stock A gives a broad trading range of prices, while stock B offers a narrow trading range and low volatility. I would recommend that the client goes for stock B because it is less risky than stock A.
To justify why I chose stock B over stock A, I would indicate that it is less volatile, thus bearing a low risk. Most stable blue-chip stocks have relatively low standard deviations. The recommendation will impact the client positively because the client will have a good ROI, and when they want to dispose with the stocks, they have an assurance that they will not lose money since stock B does not sell far from the average price.
Reference
Standard Deviation. (n.d.). Fidelity Investments. Web.