Command not found error message when running script

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I'm learning how to make shell scripts in UNIX, but I keep coming across this stupid error. Let's say I make a script like this:

#!/bin/sh
echo HELLO

I save the file as test, and make the command executable by me with chmod 700 test. I save the file in my home directory, and (attempt) to run the file like so:

./test

Only for UNIX to reply back:

./test: Command not found.

What is going on? When I type out ls -l, there is an asterisk next to the file name. That wasn't there before I used the chmod command. Can anyone tell me what I'm doing wrong?

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