Types of Enterprises – Merits & Demerits MCQs With Answer

Types of Enterprises – Merits & Demerits MCQs With Answer

This quiz set is designed specifically for M.Pharm students preparing for MIP 204T – Entrepreneurship Management. It focuses on different types of enterprises (sole proprietorship, partnership, companies, cooperatives, joint ventures, franchises, government undertakings, etc.) and their principal merits and demerits as they relate to pharmaceutical industry realities such as regulatory compliance, GMP, capital intensity, R&D needs, IP protection, supply chain and market access. Each question highlights practical implications for drug manufacturing, clinical trials, distribution and business continuity to help students connect managerial choices with scientific and regulatory constraints in pharma enterprises.

Q1. Which type of enterprise is characterized by single ownership, direct control, simple setup, but unlimited personal liability?

• Sole proprietorship
• Private limited company
• Cooperative society
• Public limited company

Correct Answer: Sole proprietorship

Q2. In a partnership firm, which characteristic is a common disadvantage when applied to pharmaceutical manufacturing?

• Ease of formation
• Unlimited liability for general partners
• Shared managerial expertise
• Flexible profit-sharing

Correct Answer: Unlimited liability for general partners

Q3. Which enterprise form offers limited liability, separate legal identity, and is typically preferred for large-scale pharmaceutical companies requiring heavy R&D investment?

• Joint venture
• Private limited company
• Sole proprietorship
• Cooperative society

Correct Answer: Private limited company

Q4. What is a primary merit of a cooperative enterprise in the context of small-scale pharmaceutical producers or herbal product manufacturers?

• Strict confidentiality of formulations
• Collective bargaining power and shared resources
• Unlimited capital-raising ability
• Low regulatory oversight

Correct Answer: Collective bargaining power and shared resources

Q5. Which of the following is a key demerit of government-owned pharmaceutical enterprises for commercial competitiveness?

• Access to public funding
• Bureaucratic delays and less operational flexibility
• Social welfare focus
• Guaranteed public procurement

Correct Answer: Bureaucratic delays and less operational flexibility

Q6. For a multinational pharmaceutical company entering a new country, which enterprise form often balances local knowledge and global control through shared ownership?

• Franchise agreement
• Joint venture with local partner
• Cooperative society
• Sole proprietorship

Correct Answer: Joint venture with local partner

Q7. Which enterprise model best facilitates rapid scaling, access to franchisor’s brand and standardized processes useful for retail pharmacy chains?

• Partnership firm
• Franchise model
• Public limited company
• Cooperative

Correct Answer: Franchise model

Q8. What is a major advantage of private equity or venture-backed corporate structures for pharmaceutical startups focused on biotech drug development?

• Minimal reporting requirements
• Access to significant capital and strategic mentorship
• Lower cost of regulatory compliance
• Unlimited life independent of investors

Correct Answer: Access to significant capital and strategic mentorship

Q9. Which enterprise type carries the disadvantage of complex compliance, extensive disclosure, and more regulatory scrutiny but benefits from easy public fund-raising?

• Sole proprietorship
• Public limited company (listed company)
• Partnership firm
• Cooperative society

Correct Answer: Public limited company (listed company)

Q10. In the context of quality assurance and GMP adherence, which enterprise attribute is most beneficial for ensuring consistent processes?

• High owner secrecy
• Standardized corporate governance and formal SOPs
• Informal family management
• Single-person decision making

Correct Answer: Standardized corporate governance and formal SOPs

Q11. Which type of enterprise is commonly used to combine complementary expertise of two firms for a time-bound project like a clinical trial collaboration?

• Joint venture or consortium
• Sole proprietorship
• Cooperative society
• Public limited company

Correct Answer: Joint venture or consortium

Q12. A demerit of family-run pharmaceutical enterprises affecting professional growth is often:

• High external investor confidence
• Limited professional management and succession planning
• Transparent governance
• Access to public capital markets

Correct Answer: Limited professional management and succession planning

Q13. Which enterprise form minimizes personal financial risk for owners but introduces higher compliance and tax obligations?

• Sole proprietorship
• Limited liability company (LLC) or private limited company
• Partnership with unlimited partners
• Informal group

Correct Answer: Limited liability company (LLC) or private limited company

Q14. Which of these is a clear merit of establishing a pharmaceutical company as a public limited company?

• Less investor confidence
• Ability to raise capital from public markets (IPO)
• Complete managerial secrecy
• Exemption from corporate governance rules

Correct Answer: Ability to raise capital from public markets (IPO)

Q15. Why might an R&D-heavy biotech prefer forming a special purpose vehicle (SPV) or subsidiary company?

• To avoid any regulatory inspections
• To ring-fence risk, IP and financing specific to that project
• To reduce requirement for scientific personnel
• To function without any corporate governance

Correct Answer: To ring-fence risk, IP and financing specific to that project

Q16. Which enterprise type often struggles with raising large scale capital quickly due to its informal structure and limited investor appeal?

• Public limited company
• Sole proprietorship and informal small businesses
• Private equity-backed company
• Listed multinational

Correct Answer: Sole proprietorship and informal small businesses

Q17. For export-oriented pharmaceutical manufacturers, which enterprise characteristic provides an advantage in negotiating international contracts and credit?

• Lack of audited financials
• Formal corporate structure with audited accounts and recognized legal identity
• Informal family-run reputation
• Minimal statutory compliance

Correct Answer: Formal corporate structure with audited accounts and recognized legal identity

Q18. Which of the following is a disadvantage of franchises for pharmaceutical retail when strict local regulatory control and professional dispensing are required?

• Uniform branding and SOPs
• Possible inconsistency in professional practice due to franchisee variability
• Access to franchisor training
• Rapid geographic expansion

Correct Answer: Possible inconsistency in professional practice due to franchisee variability

Q19. A major merit of a conglomerate or diversified corporate group in pharma is:

• Single-product dependency risk
• Risk diversification across different businesses and synergies
• Lower managerial complexity
• Guaranteed high agility for small product pivots

Correct Answer: Risk diversification across different businesses and synergies

Q20. When selecting enterprise type for a high-volume generic drug plant, which factor should be prioritized due to regulatory and market demands?

• Maximizing owner secrecy over documentation
• Robust capital structure, compliance capability, and supply chain reliability
• Minimal staffing and informal SOPs
• Choosing sole proprietorship to avoid audits

Correct Answer: Robust capital structure, compliance capability, and supply chain reliability

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