Business Case Studies & Business Publications

Hard Court Systems Ltd.: Restructuring O...

Lipson, Marc L.

Case

Hard Court Systems Ltd.: Restructuring Operations to Improve Profitability

Lipson, Marc L.

F-2151 | Published April 15, 2026 | 3 Pages Case

Collection: Darden School of Business

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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.

The financial information in the case is intentionally uncomplicated, and instructors can tailor the case to many uses based on their teaching needs. It can function as an introduction to financial statements and ratio analysis or initiate a deeper exploration of operating choices and operating leverage. It is designed for classes pursuing any of the following teaching objectives: (1) Introduce students to the income statement and balance sheet, with an emphasis on the relation between the two. (2) Build familiarity with key financial ratios, starting with the classic DuPont analysis and moving through profitability, liquidity, activity, and leverage ratios. The distinction between market value and book value of equity, in the context of ratios, can be explored. (3) Introduce the concept of operating leverage with an emphasis on the distinction between fixed and variable costs and the notion of a breakeven point. (4) Provide a basis for sensitivity analyses focused on the effect of variation in sales on operating income to illustrate the effect of operating leverage on variability.