Choice "D" is correct. The operating activities section includes cash flows from working capital (current assets and current liabilities) and other income statement items. Under the indirect method, net income is adjusted for non-cash items and increases/decrease in working capital items to arrive at net cash from operating activities. Increases in current assets and decreases in current liabilities are uses of cash, while decreases in current assets and increases in current liabilities increase cash.

Choice "b" is incorrect. The increase in available-for-sale securities decreases cash and is reported in the investing section, not the operating section, of the statement of cash flows.
Choice "c" is incorrect. The mortgage repayment is a cash outflow that is reported in the financing section.
Choice "a" is incorrect. Net income must be adjusted for the decrease in AP as well as the increase in inventory.