The Nielsen–Schreier theorem says that every subgroup of a free group is free. Realize as the fundamental group of the rose , the graph with one vertex and oriented loops. A subgroup of finite index of a subgroup corresponds to a connected -sheeted covering graph . The graph has vertices and unoriented edges. Choosing a spanning tree leaves
edges outside the tree, and these freely generate . Thus the Nielsen–Schreier formula is
Take the free abelian group , whose rank of a group is two, and its finite-index subgroup . The subgroup has index two and is again isomorphic to , so its rank is two. The Nielsen–Schreier formula would instead give . Hence
is a counterexample.
Let be the rank of a group, let be a generating set of size , and suppose . Choose a Schreier transversal adapted to a spanning tree in the Schreier coset graph. By Schreier's lemma, is generated by the elements
There are candidates. The oriented edges in the spanning tree give trivial candidates, leaving at most . This proves the Schreier index-rank inequality
Let have a generating set of a group with elements. Every subgroup of index gives a transitive group action of on the left cosets of , hence a group homomorphism after the cosets are labelled. Conversely, is the stabilizer subgroup of one point in this action.
A homomorphism is determined by the images of the generators, so there are at most such homomorphisms and at most point stabilizers. Therefore the finiteness of subgroups of a fixed finite index gives only finitely many subgroups of index .

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