It tells you if you have enough cash to pay your firm's current creditors. The higher the ratio, the more liquid the firm's position is and, hence, the higher the credibility of the firm. Cash, receivables, marketable securities, and inventory are current assets. Naturally, you need to be realistic in valuing receivables and inventory for a true picture of your liquidity, since some debts may be uncollectable and some stock obsolete. Current liabilities are those which must be paid in one year.
Quick assets are current assets minus inventory.
The purpose, again, is to test the firm's ability to meet its current obligations. This test doesn't include inventory to make it a stiffer test of the company's liquidity. It tells you if the business could meet its current obligations with quickly convertible assets should sales revenues suddenly cease. The lower the ratio, the higher the proportion of equity relative to debt and the better the firm's credit rating will be. You find this ratio by dividing accounts receivable by daily credit sales.