The study developed a new method to test if companies face financial constraints when making investments. By using a model that considers both fixed and variable capital, the researchers found that the sensitivity of fixed investment to cash flow is not a good measure of financing constraints. Instead, they proposed a test based on variable capital investment, which correctly identified financially constrained firms even with noisy data. The test was effective regardless of the type of adjustment costs for fixed capital, and was validated on a sample of US companies.