At the start of fiscal year 2025, Hard Court Systems Ltd. (HCS), an Australian producer and installer of surfaces for tennis courts, has embarked on a major restructuring of its operations. With 2025 financial results just released, CFO Charles Walker is preparing to meet with shareholders to discuss the business’s financial performance. A key transformation brought about by the restructuring is an increase in fixed costs due to investments in new equipment and other changes that added scalability to operations. The hope is that margin improvements will justify these investments. Adding dimension to the case is the observation by one analyst that HCS has placed itself at risk due to increased operating leverage. In addition to standard ratio analysis, Walker therefore needs to calculate breakeven levels and execute some form of a sensitivity analysis.

This short, fictional case has been used successfully at the University of Virginia Darden School of Business in a pre-matriculation class for MBA students and in executive programs as an introduction to financial analysis. It is appropriate for undergraduate or graduate students. There is ample material for an 85-minute class, and it can likely be adapted for two undergraduate 50-minute classes: one devoted to financial statements and ratios, the other to breakeven points and sensitivity analyses emphasizing the effects of operating leverage. This case is an update that replaces UVA-F-1747.