Final answer:
The term sunk costs refers to budgeted financial statements that predict a future outcome that is created with the best information available at the time they are prepared.
Step-by-step explanation:
The term referred to in the question is pro forma financial statements. These are budgeted financial statements The term referred to in the question is pro forma financial statements. These are budgeted financial statements prepared with the intention of predicting future financial outcomes using the best available information at the time of their creation.
The concept ties closely to the rational expectations theory, which posits that people formulate expectations about the future using all available information. This approach differs from adaptive expectations, where expectations are based on past events and information accrual.
Within the budget constraint framework, the focus is on decisions regarding future consumption, work, or savings, disregarding sunk costs which should not influence current decisions.