The short-term investment classification refers to funds that have been placed in investment instruments that will mature within one year or which are expected to be liquidated within one year. Examples of these instruments are money market funds and marketable securities. Most investments that are actively traded can be considered short-term investments, since they can be easily liquidated. The amount invested in these instruments is classified as a current asset on the balance sheet of the investor.
A business typically stores a large part of its excess funds in short-term investments so that it can earn a small return while still being able to access the funds for its operating needs on short notice.