What is meant by Short-Term Liquidity?

Short-Term Liquidity refers to the entity’s ability to settle its short-term (current) liabilities using the short-term (current) assets.
The entity would have purchased a stock of raw materials on credit terms, it would need to pay its electricity usage bills or it would have obtained an overdraft facility from a bank to make a payment. These dues need to be settled in a very short time span, maximum within a year.
To meet these short-term liabilities, the entity needs current assets maturing within a year and that can be readily convertible into cash. Cash in hand and cash at bank can be freely used for this purpose. The short-term investments are the ones maturing within a year and this can also be used. The finished goods inventory can be sold and converted into cash and collection from the entity’s debtors can also be done within a year.
Short-term liquidity is when the current assets are adequate enough to meet the short-term obligations.