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Factor; then use fundamental identities to simplify the expression below and determine which of the following is not equivalent.
Miller and Modigliani
Refers to the theorem proposed by Franco Modigliani and Merton Miller, indicating that under certain market conditions, the valuation of a company is unaffected by its capital structure.
Debt Financing
The method of raising capital through borrowing, typically through loans or by issuing bonds.
Financial Leverage
Financial leverage involves using borrowed funds to increase the potential return on investment; however, it also increases the potential risk of loss if the investments do not perform well.
Operating Leverage
A measure of how revenue growth translates into growth in operating income, highlighting the fixed vs. variable cost structure of a company.
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