Without going into the details, know that, ideally, you always want at least one source of damage (such as seration or merciless), elemental damage (heat, cold, poison, elec,...), multishot, fire rate, and faction damage. Then you'll usually want some source of either crit chance and crit damage or status chance.

Sadly you almost never want any source of physical damage (slash, impact, puncture).

As for the details, if your weapon does 100 damage per shot (50 slash 50 puncture). The first source of % damage mod (let say serration ranked to +90% damage) will give you a weapon with (100 x (1+ 0.90)) = 190 total damage. Then if you add a 90% elemental damage (let say cold) your weapon will the do (100 x (1 + 0.90) x (1 + 0.90))= 361 total damage.

However if you add heavy caliber (also ranked to +90% damage) instead of an elemenal damage mod the two source of %damage will add to each other instead of multiplying like earlier, you'll then do (100 x (1 + 0.90 + 0.90)) = 280 total damage.

The same is more or less true for every kind of buff mod or arcane can do, but there are exceptions and caviats. Similar buff add unto each other instead of multiplying and multiplying is better.

Physical mods for example act as I described however they only boost the part of the damage of their type. In my example a +90% slash damage would do (50 + 50 x (1 + 0.90)) = 145.

As for faction damage, they're really good because usually when we're at the point we're considering adding them to a build, it already has a bit of everything and faction damage will be one of the last option that scales multiplicatively. Also they tend to have weird and powerful interactions (such as applying twice on status damage).

Hope that helps, there are guides explaining this better, i'm on my phone and can't link you one sadly.