Incremental analysis is a decision-making tool used in business to evaluate the financial impact of different alternatives. It focuses on the additional costs and benefits that will result from a specific decision, helping managers determine the most profitable option. This method simplifies complex decisions by isolating relevant data and ignoring sunk costs, which are expenses that cannot be recovered. By comparing the incremental revenues and costs associated with each alternative, businesses can make informed choices. This approach is particularly useful in scenarios like make-or-buy decisions, product line expansions, or cost-cutting measures, where understanding the financial implications of each option is crucial.