I want to study financial constraints on companies of different groups and for that I try to use Whited-Wu index:
WW = - 0.091CF - 0.062DIVPOS + 0.021*TLTD - 0.044*LNTA + 0.102*ISG - 0.035*SG
TLTD is the ratio of the long-term debt to total assets;
DIVPOS is an indicator that takes the value of one if the firm pays cash dividends;
SG is firm sales growth;
LNTA is the natural log of total assets;
ISG is the firm’s three-digit industry sales growth;
CASH is the ratio of liquid assets to total assets;
CF is the ratio of cash flow to total assets (see Whited and Wu. Financial Constraints Risk. 2006).
Although I managed to compute it, I have difficulties with results interpretation. My idea was to compare different companies/groups of firms using this index. As written in one of the papers, "higher index values can be associated to higher need of external capital". So if in 2010, for "Toyota" I got value -0.9 and for "Fuji Technica Inc." -0.53, may I conclude that Toyota is more financially constrained (requires more external capital)? Similarly, if I get two industries - food and car producing - then the first have higher values of WW.