The way you are responding sounds like you think I am calculating net income independently, and then just arbitrarily raising it by inventory. I'm not doing that. I'm deriving net income backwards from the net cash flow from operations. If net cash flow from operations includes $3.4M of inventory cost and net income should not include that cost, then you have to add the $3.4M back to get back to net income.
I'm not having a hard time understanding it. I'm trying to show by example how the law as written makes it almost impossible for vendors with substantial inventory to do more than break even on a *cash flow from operations* basis, unless they can establish enormous scale and turnover. It's not about understanding how it works. It's about expressing amazement that it is allowed to work that way. If the example I gave with the $40M company doesn't convince you of that nothing will I guess. If you only look at net income it all looks reasonable. When you study the effect on cash flow from operations, it looks devastating.
You say to the car dealer "don't buy $3.4M of inventory" but the way they got the $2M of cash flow from operations was by buying $3.4M of inventory every month. One doesn't exist without the other.
I'm clear on this.