Sunken cost is the cost that has occurred or promised to occur and cannot be recovered, such as the unrecoverable investment caused by mistakes. Sunk cost is a kind of historical cost and irrelevant cost in investment decision. Sunken cost can be divided into direct cost or indirect cost according to the traceability of cost; According to the form of cost, it can be divided into fixed cost or variable cost; According to the quantity, it can be divided into full cost or partial cost.

Enterprises should try their best to avoid decision-making mistakes to reduce sunk costs, which is conducive to avoiding investment risks, ensuring the stability and reliability of enterprise transactions and providing enterprises with a suitable business environment.