Final answer:
Solvency ratios measure how much a firm relies on borrowed funds in its operations, indicating long-term financial stability.
Step-by-step explanation:
The type of ratios that measure the degree to which a firm relies on borrowed funds in its operations are solvency ratios. Solvency ratios assess a company's ability to sustain its operations in the long term by examining the proportion of debt and equity financing. These ratios are essential as they give insights into the firm's leverage and financial stability, which can affect the firm's ability to secure loans, attract investors, and overall survival in the market.
On the other side, liquidity ratios deal with a firm's ability to meet short-term obligations, profitability ratios measure how effectively a firm can generate profit, and efficiency ratios evaluate how well a firm uses its resources.