ABC Analysis is a method used in inventory management to categorize items based on their importance. It divides inventory into three categories: A, B, and C. Category A includes the most valuable items, which typically account for a large portion of the total inventory value but a small percentage of the total items. Category B contains moderate value items, while Category C includes the least valuable items, which make up the majority of the inventory. This classification helps businesses prioritize their management efforts. By focusing on Category A items, companies can optimize their resources and improve efficiency, ensuring that critical items are always in stock while managing less important items with less attention.