I want to know more about concept of effective percentage. For example A sells to B at profit of 20 % and B sells to C at profit of 10 %. Then their effective profit percentage?
effective percentage = A + B + AB/100, i.e 20 + 10 + 200/100 = 32 %
I want to what is concept here and what exactly is profit percentage?
The best way to think about percentages is with multiplication rather than addition.
Suppose A sells an item that cost $X$ to B at at $20\%$ markup. Then B pays $$ 1.2 X $$ (the $1.2$ is the original $1$ plus the $20/100$ markup). If B then sells to C at a $10\%$ markup then C pays $$ 1.1 \times 1.2X = 1.32X . $$ That is why the combined markup is $32\%$, not $10\% + 20\% = 30\%$. The "extra" $2\%$ is because the second markup was applied to a larger, marked up cost.
If you multiply out $$ (1 + 0.1)\times(1 + 0.2) = 1 +(0.1 + 0.2 + 0.1\times0.2) $$ you can see the formula in the question.
