ABC analysis is a selective inventory-control technique based on the Pareto principle (the 80/20 rule): a small fraction of items usually accounts for a large fraction of the total annual consumption value (unit cost × annual usage). Items are ranked by this annual usage value and split into three control classes so that management effort and control tightness are matched to each item's financial importance.

The three classes are conventionally described as follows.

From this, the 'C' class comprises low-valued items that are large in number — the correct choice. Because these items tie up very little capital individually, they are managed with simple, low-cost policies (large order quantities, infrequent review, generous safety stock).

The distractors invert this relationship. High valued items, smaller in number actually describes the A class, which demands the tightest control, so it cannot describe C. High valued items, larger in number is self-contradictory for ABC logic, since high-value items are always the few, not the many. Low valued items, smaller in number misstates the quantity — C items are numerous, not few. Hence C = low valued items, larger in number.