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C is corrent. When presenting cash flows from operating activities under the indirect approach, net income must be adjusted for changes in current assets (other than cash) and in current liabilities. Further, noncash events must be removed from net income to complete the conversion of net income from an accrual basis to a cash basis. When inventory increases, inventory sold is less than inventory purchased. Therefore, CGS on an accrual basis is less than it would have been if the cash basis were used. In converting to the cash basis, the increase in inventory must be subtracted from net income to arrive at cash from operations.
A is incorrect. An increase in inventory would not be an addition to net income. Refer to the correct answer explanation. When presenting cash flows from operating activities under the indirect approach, net income must be adjusted for changes in current assets (other than cash) and in current liabilities. Further, noncash events must be removed from net income to complete the conversion of net income from an accrual basis to a cash basis. When inventory increases, inventory sold is less than inventory purchased. Therefore, CGS on an accrual basis is less than it would have been if the cash basis were used. In converting to the cash basis, the increase in inventory must be subtracted from net income to arrive at cash from operations.  
B is incorrect. An increase in inventories requires an outflow rather than an inflow of cash, but such an increase is not shown as an outflow of cash when the indirect method is used.
D is incorrect. Even though an increase in inventories requires an outflow of cash, such an increase is not shown as an outflow of cash when the indirect method is used. When presenting cash flows from operating activities under the indirect approach, net income must be adjusted for changes in current assets (other than cash) and in current liabilities. Further, noncash events must be removed from net income to complete the conversion of net income from an accrual basis to a cash basis. When inventory increases, inventory sold is less than inventory purchased. Therefore, CGS on an accrual basis is less than it would have been if the cash basis were used. In converting to the cash basis, the increase in inventory must be subtracted from net income to arrive at cash from operations.