Step: 1
Correlation is a measure of the strength of the relationship between two variables. It is used to predict the value of one variable given the value of the other.
Step: 2
Causation is the act of causing one variable to happen due to the other variable's effect.
Step: 3
In the problem, the money spent on R & D and the firm's annual profits are the two variables.
Step: 4
If the money spent on R & D is more, then the firm's annual profit is also more. So, there exists a causal factor between the two.
Step: 5
Therefore, both correlation and causation exists.
Correct Answer is : There is both correlation and causation.