Free cash flow (FCF) can be obtained by $$ \text{FCF}=(\text{Revenues}-\text{Cost}-\text{Depreciation})(1-\tau)+\text{Depreciation}-\text{Capital Expenditures}-\Delta(\text{Net Working Capital}) $$ where $\tau$ is the corporate tax rate and $$ \Delta(\text{Net Working Capital})=\Delta(\text{Cash}+\text{Inventory}+\text{Receivables}-\text{Payables}) $$ is the increase in net working capital over the period of interest. Besides inventory, all of these items appear to be monetary, except for depreciation which only affects the FCF through taxation, and so that contribution is also monetary.
But what about inventory? A change in inventory does not generate any monetary gains or losses, or does it? If it does not, how come a change in inventory is included in the calculation of the FCF?