The Modigliani-Miller theory explores how a company's mix of equity and debt affects its financial performance. By finding the best balance between these two types of capital, a company can lower its overall cost of capital and increase its value. This theory, developed by Nobel Prize winners, revolutionized how we understand capital structure and its impact on businesses. Before their work, most analyses were based on observations rather than quantitative data. The key takeaway is that the right mix of equity and debt can significantly influence a company's profitability and overall worth.